Safe and Sound

Avidbank

Avidbank is a San Jose, CA-based, FDIC-insured bank founded in 2003. Regulatory filings show the bank having equity of $83.6 million on assets of $781.3 million, as of December 31, 2017.

U.S. bank customers have $662.1 million on deposit at 2 offices in CA run by 84 full-time employees. With that footprint, the bank currently holds loans and leases worth $640.0 million, including $409.0 million worth of real estate loans.

Overall, Bankrate believes that, as of December 31, 2017, Avidbank exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Keep reading for a breakdown of how the bank fared on the three major criteria Bankrate used to evaluate U.S. banks.

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a cushion against losses and affords protection for depositors when a bank is struggling financially. It follows then that a bank's level of capital is a useful measurement of an institution's financial strength. When it comes to safety and soundness, more capital is better.

Avidbank came in below the national average of 13.13 on our test to measure the adequacy of a bank's capital, scoring 12 out of a possible 30 points.

A bank's Tier 1 capital ratio is an important measure of this buffer. Avidbank's Tier 1 capital ratio was 10.07 percent, higher than the 6 percent level regulators consider adequate, but less than the national average of 25.65 percent. A higher capital ratio means the bank will be better able to stand up to financial headwinds.

Overall, Avidbank held equity amounting to 10.71 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

Bankrate uses this test to estimate the impact of problem assets, such as past-due loans, on the bank's loan loss reserves and overall capitalization.

Having large numbers of these types of assets could eventually require a bank to use capital to cover losses, reducing its equity buffer. Many of those assets are also likely to be in non-accrual status and no longer earning money, pushing down earnings and elevating the risk of a future failure.

Avidbank scored 40 out of a possible 40 points on Bankrate's asset quality test, beating out the national average of 37.49.

The percentage of problem assets a bank holds compared to its total assets is a helpful indicator of asset quality.As of December 31, 2017, 0.79 percent of Avidbank's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks keep a reserve to deal with troubled assets known as an "allowance for loan and lease losses." The size of that reserve can be a useful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of problem loans. Unfortunately, the FDIC did not provide information on Avidbank's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is has an effect on its long-term survivability. A bank can retain its earnings, giving a boost to its capital buffer, or put them to work addressing problematic loans, potentially making the bank more resilient in tough times. However, banks that are losing money have less ability to do those things.

On Bankrate's earnings test, Avidbank scored 16 out of a possible 30, above the national average of 15.12.

One widely used measure of a bank's earnings is return on equity, or net income (profit, basically) divided by total equity. Avidbank's most recent annualized quarterly return on equity was 8.28 percent, above the national average of 8.10 percent.

For the twelve months ended December 31, 2017, the bank reported net income of $6.1 million on total equity of $83.6 million. The bank reported an annualized return on average assets, or ROA, of 0.85 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.

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